An Historical Perspective
The vivid history of struggle for labor unions in Northeastern and Midwest cities left a legacy of distrust and resentment but also a feeling of empowerment as wages, benefits and living standards all improved for union members. Strong union leadership came to influence and intimidate political leaders. Reactions to threats such as non-union participation in large construction projects or service workers in urban cores were loud, confrontational and mostly, successfully opposed. As union membership declined nationally their membership held. Aggressive negotiating tactics and the threat of strikes were modus operandi. These strategies survived later generations of union leadership up to and including the building boom in urban convention centers in the 1980s and 90s.
So it is no coincidence that convention centers could be said to be genetically tied to unions. In the years of new and expanded convention centers, finding financial resources needed to build new was a formidable task. Political leaders therefore:
- Dealt with the financial issues by garnering vocal political support and labor unions could always be counted on.
- Understood that the quid pro quo for union support has been continued employment relating to convention center operations – so many convention centers are born with union labor at their side.
- Created an environment where convention center management often carried the recognition that unions have political clout, enough to make managers unlikely to push hard for change. Without support, the unreasonable demands and bad habits that unions carried were rarely challenged. Tradeshow contractors through a local trade association negotiated Collective Bargaining Agreements (CBAs) and administered the same to most of the convention center work forces. Their attitude was similar to the convention center management’s – they felt that the unions occupy a stature not easily contested.
We know now that these agreements and how they are managed day to day are a key element to a convention center’s business reputation. If things go badly the convention center and the city suffers damaging publicity, rarely are the trade show contractor’s associations held accountable. For some cities things did go badly:
- Detroit’s convention business, already a hard sell in the 1980’s, turned into the lowest occupancy of any major city, largely due to union excess.
- During the same period in New York City, the leadership position as the city with the biggest and the best shows quickly changed. New York’s problems took on notoriety as organized crime infiltrated the unions. The Javits Center became the worst example of union labor problems – mobbed up, featherbedding to excess, with organized theft on the exhibit floor and loading docks, payroll and insurance fraud and worse.
- Chicago’s McCormick Place and the Pennsylvania Convention Center in Philadelphia were not far behind.
Union leadership had become the de facto managers of convention centers.
How did this happen? Too often management forfeited control of hiring decisions, production schedules, work rules and nearly everything else that governs an orderly productive work force. It came to be that event managers insisted that union shop stewards participate in event planning meetings – they knew where the power to set up an event efficiently and peaceably resided. What occurred was a sorry history of appeasement and indulgence to union demands. There was a purposeful and persistent avoidance of confrontation. In sum, there was no will to make things right.
Meanwhile in the convention center boom of 1980s and 90s, centers opened or expanded in “right to work” states of the South where there was lower labor costs and an absence of strong union culture. Quite rapidly the business advantages of southern and western cities became clear and convention centers in the Northeast and Midwest began to lose market share. West coast convention centers which were union buildings, such as the Las Vegas Convention Center, the Sands Convention Center, Moscone Center in San Francisco and the San Diego Convention Center thrived also. One big differentiator was and is that customer service was simply better in the South and West. It was apparent that the hard-edged “us vs. them” union culture wasn’t present – they were and are friendly, polite, reasonable, helpful, with no shop stewards enforcing “rules”. Managers from the large freight and decorating companies have spoken openly about how cooperative labor is in Anaheim, San Jose, San Francisco, San Diego, Phoenix and Las Vegas. Company managers could concentrate more on show production and service. In these cities the union wage and benefits paid were comparable to Chicago and the East coast and the decorating/freight moving contractor’s business model was the same. By most measures New York and Chicago had similar competitive appeal, yet Chicago and New York still lost market share for the best shows.
Customer service and prevailing business expectations of service were something that unions were loath to understand and accept. Innovative and emerging businesses like information technology or the health sciences were generally non-union companies. They were conscious of the marketing investment required to participate in a tradeshow, convention or conference. Their focus was and is all business, and they were put off when confronted with service that was indifferent, expensive, and often corrupt. Why tolerate this when there were alternatives? It didn’t take long for show managers to move their events to other places. They abandoned traditional market locations in part to save their exhibitors from union labor. But change was in the wind and New York’s Javits Center was first.
The Tipping Point
In the Spring of 1995 we were fortunate to be part of a team that planned and executed taking over all labor contracts at the Javits Center. Some were held by the NY Exhibition Contractor’s Association. Labor reform was only part of steps taken to turn around Javits Center’s declining business but it was by far the action that sticks in everybody’s memory. It was clear to most that the business decline and sordid reputation had reached a point where the hospitality businesses in the city were primed and ready for something radical to occur.
In the beginning of 1995 press reports about Javits Center mismanagement and presence of organized crime in the work force were common. The points below describe the environment we had going in:
- We had strong political support. NY State’s new governor at the time, George Pataki, knew of and fully supported our plan
- Two of the unions were being investigated for corruption and under some type of federal or court mandated supervision.
- Before contract negotiations began the unions accepted three important conditions; overlapping work jurisdictions were over, there were to be two principal work forces- one for exhibit building and the other for freight moving, and; the Javits Center could hire from any source.
The Javits labor reform plan was executed swiftly. Once launched, in one week’s time there was an entire new work force with the following:
- No overlapping work jurisdictions or composite crews
- Hiring requirements administered by the Javits Center covering personal appearance, customer service attitudes and skill
- New work rules, service, integrity and productivity standards
- 24 hr, straight time labor, M thru F
- Apprentices added to the carpentry work force without prescribed ratios to journeymen
- Broad management rights; management would decide on crew sizes, multiple shifts and flexible start times for carpenters, who would work overtime, etc.
Within one year center occupancy improved from 35-40% to 60-65%.
How to Negotiate a CBA that Fits the Convention Center Business Model
The narrative below focuses on the Javits Center CBAs developed in the mid 1990s as the best example of agreements that were designed specifically to fit the event business. There are no construction work rules, required union referral for labor, special work jurisdictions, supervision and apprentice ratios or double time wages. It covers all the major sections that should be added or amended from existing CBAs in order to achieve meaningful structural change. The Javits Center agreements and business aftermath did not forfeit any work to others, retained the general administrative management functions for exhibit building (Carpenters) and freight moving (Teamsters) work forces and charged an hourly fee to contractors for hiring them. In their labor reform McCormick Place forfeited electrical services and permitted exhibitors to do a major fraction of exhibit building – perhaps good for show managers and exhibitors but a major loss of revenue for McCormick Place and trade show contractors. In the Pennsylvania Convention Center’s labor reform, the problems of overlapping jurisdictions and a generally unmanageable carpentry work force were solved to a point. However, there still remains a pending appeal by the carpenter’s union via the state’s public labor regulators.
The Javits Center CBAs are different in that all the CBAs are held by the center. For contract labor (the work that General Decorating contractors and EACs do), contractors hire from the Javits Center. The center manages the contract, does all the payroll and administrative functions, hires and fires, conducts training, provides uniforms, etc. In most other convention centers the trade show contractors association normally hold the carpentry and freight moving contracts while the convention center holds the utility services contracts. The advice and counsel given below can be applied to both circumstances.
Preparing for Negotiations
If you’ve experienced union labor problems at convention centers there is a familiar pattern of conditions that evolves. Firstly the CBA is generally modeled after city-wide construction agreements and gives unions too much control:
- Labor assignments are by union referral only
- There are jurisdictions within jurisdictions for specialized work all requiring one or more levels of supervision.
- There are ratio limits for the use of apprentices who are often unavailable.
- The wage and benefit packages are expensive with benefit loads exceeding 50% of wages.
More harmful to management however are the subtle and insidious ways the union can expand and exercise power and control:
- Friends and family of union leadership will begin to occupy supervisory and shop steward positions
- Union stewards will slowly move into making a few then many management decisions over the work force
- Customer service standards will become secondary; complaints will bubble up; bad publicity will follow and market share will erode.
Our experience is that the local service contractor’s association views organizing for the hard task of a contract dispute or prolonged negotiations too big a business risk. For a convention center, you have reached the tipping point –something structural and meaningful has to happen. If a labor take-over by a convention center is being considered, it will require strong political and business support and a management team that can plan and execute well.
In most circumstances, unless the union side is business-savvy and enlightened, there is likely to be no material or radical change on either side of the table. That is normally the case until there is a compelling reason to change and a resolute desire to change things by the convention center. Publicized scandal, corruption, and a severely declining business environment are compelling reasons. A well prepared management negotiating team will recognize and exploit these situations. Most of the public believe that negotiations are a series of proposals and counter proposals about wages and benefits, but there are issues equally important to obtaining a favorable CBA. These issues revolve around trade jurisdictions, management rights, and literally all the routine things that control the conduct of work and productivity of the work force. For every fraction of increase agreed to on wages and benefits there should be a comparable fraction taken in order to achieve a more effective level of management control and a diminishment of onerous, non-productive and often silly work rules.
There should be a standard check list to prepare for these negotiations. First and foremost however, you need to have a clear buy – in from the center’s Board of Directors and the politicians that appointed them. Unless the unions are large and sophisticated represented by legal counsel, you can generally rely on them being unprepared. Know the personalities. Mostly unions will send a local business agent to negotiations. That individual will come with one or two key employees, one the shop steward. You should be thoroughly prepared with:
- Lost business/declining business statistics
- Customer complaints
- Samples of bad publicity mentioned in the press
- Employee statistics; productivity, absenteeism, sick time statistics, workman’s compensation claims, etc.
- Business facts regarding your competitors
- Union work rules at competitive convention centers
- Insist that the unions provide copies of all their CBAs with other employers for maintenance and construction.
Union business agents will normally begin with a series of unreasonable demands and petty complaints. Expect some sermonizing on their part. So be patient, let the drama pass and wait to ask when they will be ready to seriously negotiate. Hold off on submitting company demands as long as you can – let all the unacceptable and unreasonable arguments play out. Stick to your plan and don’t get emotional.
Important CBA Sections
Contract Objective – This section is sometimes ignored as high minded language which no one is likely to use as a basis for dispute. It should contain the usual perfunctory phrases regarding prevention of strikes and lock outs and peaceable settlement of grievances. The language of this section is key however because it sets the foundation of trade union responsibilities and can come up as a management basis for a contract dispute or as a reasonable defense in an arbitration proceeding. The Contract Objective section is the essence of the contract – the union provides enough qualified labor and the employer provides work and pays them fairly. This is no small matter.
Trade Jurisdiction – This is a difficult section and has to artfully written. It’s worthwhile to compose this section as elegantly as possible where a few words and phrases spell out the jurisdictions with clarity. If necessary, difficult ambiguities should be covered in a separate “exceptions” paragraph.
Another item normally covered by the Trade Jurisdiction section is the identification of classifications within a trade (journeyman, apprentice, etc.). Be sparse in any language and phrases, for example, identifying supervision (foreman, leadman, etc.). Quite often by listing all the supervisory classifications, working groups end up with unnecessary and multiple levels of supervision.
Union Recognition – This section normally gives recognition to the union as the exclusive bargaining entity for employees. It’s also a section which can be used to control the activities of union representatives and business agents on your site. It can regulate pre-notification of a site visit, proper credentialing, access, time spent with members, and general conduct on site. Union representatives should not have carte blanche access to your property.
Management Rights – The CBA should in all respects balance employee interests (wages, benefits, overtime, safe working conditions) with employer interests which really involve retention of critical decision making options. On the employer side this is generally achieved by a Management Rights clause. As with the Trade Jurisdiction section, it’s worthwhile to compose this section as elegantly as possible where the words and phrases spell out management rights with clarity.
While we favor the above approach, some legal experts contend that a short list of fundamental rights coupled with all encompassing language is simply not sufficient. Employers want to rely on residual rights. This means that all rights to operate the business are retained except those relinquished by other provisions in the CBA. Legal experts however point to a history and bias of Public Employment Commissions or Authorities where they clearly favor the process of collective bargaining when items such as management rights are vaguely expressed.
Extraordinary Sections to the Management Rights Clause – There are exceptions which require separate mention and emphasis from work rules. At the Javits Center it was accepting gratuities and drug and alcohol testing.
Accepting gratuities has long been cause of much of the industry’s bad reputation. Indeed, convention centers in Detroit, New York, Chicago and Philadelphia have suffered dismal business reputations because this got out of control. Acceptance of a gratuity became a demand in some instances. All cities have largely curbed this abuse but the legacy of bad news is difficult to change. There must be a provision prohibiting acceptance of gratuities and a “no tolerance” standard set, i. e., immediate dismissal. Some cities such as Philadelphia’s separate Customer Satisfaction Agreement or Chicago’s Exhibitor’s Bill of Rights could be considered worthy of separate CBA sections. Drug and Alcohol Testing needs a separate section because it requires a true examination by legal counsel. There are health and personal privacy issues to consider too. Normally authorized testing is permitted on hiring, on a post accident investigation, or when there is strong management suspicion of abuse. Random testing can only normally be done for security workers or fork lift drivers.
Hiring – An ideal “Hiring” section should include the following:
- A provision giving the Employer the right to hire from any available source. This will be aggressively contested but is necessary. Most of the union problems are rooted in a clique of union members who have a strong loyalty to the union and will cooperate with things like customer service initiatives only in the most superficial way. The employer should not be limited by bad choices. Establishment of a probationary period for new employees for a time (1 year is best) after hiring. These probationary employees can be discharged at any time and the discharge not subject to grievance procedures.
- Include a provision which permits a reduction in force. Probationary employees will be first and all others by work performance. If employees are regarded as equal performers, then date of hire will govern.
- The reduction in force provision is often regarded as the “seniority clause”. Certain unions, particularly the Teamsters (IBT), will attach a system for work calls based on date of hire language in this provision. Once established, productivity normally declines and rank and file workers regard themselves as protected. It’s normally not possible to negotiate this out of a CBA with IBT. Interpretations of seniority are the most frequent cause of IBT grievances. At this point a whole new series of work rules have to be established in order for the Employer to properly control the abuses which accompany work call seniority.
Joint Employer – This section is necessary if the CBA is held by the convention center. It permits others; decorating and drayage contractors, exhibiting companies, and EACs to supervise your employees. To avoid a challenge to the Joint Employer clause, there are some employer obligations that have to be fulfilled. There are some well established and uncomplicated legal tests regarding the a convention center’s level of participation in actually managing and administering the workforce which should clear up and legitimize a convention center holding the CBAs.
Hours, Holidays and Overtime Pay – This section contains the most meaningful terms and greatly affects a convention center’s ability to increase business volume and maximize occupancy. Prolonged event move ins and move outs result in lost opportunity. Event managers will do whatever they can to help their exhibitors avoid overtime and double time. They will even threaten to hold the event elsewhere when the move in and out schedule cannot accommodate their demand for “straight time” move ins and outs. To that end, this section should have provisions covering management’s right to organize multiple shifts, ST wages for the 1st eight hours of work (M-F), one and one half time wages for Saturdays, Sundays and holidays , a training day rate less than ST and several more.
Wages and Benefits – Always controversial, many trade union agreements mirror the wage/benefit package that skilled trades receive in the construction industry. This applies mostly to electricians, carpenters and plumbers. The benefit load sometimes exceeds 50% of the wages. This developed because the unions argued that the construction industry regularly experienced ups and downs. The benefit load therefore had to be high in order to help membership through prolonged periods of unemployment. Unions historically and aggressively insisted that the same package apply to trade show and convention workers and were successful. This is a cause for competitive problems – work forces in non-union or right to work states have much lower labor rates. None of their compensation packages are close to those seen in New York, Boston, Chicago or West coast cities.
The most reasonable expectation is to negotiate against benefit funds that clearly only benefit construction workers or funds that have no material purpose, such as a labor/management cooperation fund. Another benefit fund which may have some prospect of reduction is health insurance funds. As Employers you probably over- pay because many union members must meet or exceed a certain number of work hours per quarter in order to be eligible. Of course many union members do not meet the minimum time required to be eligible, yet as employers you paid the benefit.
Grievance and Arbitration Procedures – Insist on rigid administrative procedures (union responsibility) with respect to timing, meetings and written documentation. Make certain that if these procedures are neglected and not followed, then the grievance is deemed waived. Choose an arbitration organization which does not rapidly move towards arbitration hearings. The longer the process the more favorable it is for the Employer. Most grievances are frivolous and are direct challenges to management rights. Unions have the expectation that the Employer always wants to avoid arbitration and will move towards a negotiated settlement instead. In the long run, a prolonged measured process works best. The point is that union administration is not disciplined enough to meet the filing standards for grievances where deadlines must be met with proper documentation and formats. This is cause to have the grievance dismissed without going to arbitration. The lengthy process is another administrative burden which some unions simply don’t have the time and patience for. They generally lose their enthusiasm for the grievance cause after a long wait.
No Strike, No Lock Out – Spell out all the variations of a work slowdown; sick out, an apparent slowdown measured (in %) loss of productivity, unprecedented malingering, etc.
Past Practices – Be very specific that the employer will adhere to the express terms of the CBA and not be bound by past practices.
Other Sections – Miscellaneous (examples):
Shop stewards – All should be working stewards. Outline conduct and work routine of shop Safety rules and equipment must be adhered to at all times.
Cell phones, ear buds, I-Pods cannot be used during work
If you are successful and obtain some or most of the above recommendations in the executed CBA language, then naturally your management team will have to consistently administer the contract in order to make it useful and effective for your business. This is much easier said than done. It requires a structure of policies, rules, enforcement measures, and training. Then the hardest task of all, it demands no compromise. You would be surprised how swiftly a well negotiated CBA can erode by avoiding stressful situations when the appropriate action is to do the opposite, by unwittingly giving the union management responsibilities like asking the shop steward to choose and obtain extra workers, by deciding not to arbitrate against a grievance regarding a work rule because you may lose or the legal costs are too high. The long term cumulative effect of these and other lapses makes the hard work of negotiating futile. Know this – when you take on the responsibilities as a signatory to the CBA, you own that work force and all the responsibilities which are not only expressed but also implied.
NOTE: Contributing to this article was Andy Peterson. Andy is a Senior Partner at the law firm Jackson Lewis, PC. Andy was the Javits Center’s outside labor counsel in 1995 and was the architect of the center’s original Collective Bargaining Agreements. Andy is still a legal advisor on union labor matters to the Javits Center.
How Can We Help?
Reorganizing and negotiating CBAs that better fit and contribute to your business model can be a formidable task for those who have not been through the process. We can provide experienced advice and counsel and help steer your center’s efforts in re-negotiating your CBAs. Call 203-273-6999 or email email@example.com
As part of my consulting practice I either subscribe to newsletters regarding the convention and meetings industry or receive news alerts on related subjects. There are many, and hardly a week goes by when there is not one or more press releases celebrating a city’s booking of an important international event. These are not usual press releases but often newspaper and business journal articles. The articles are all very upbeat as if the city convention bureau had just won a lucrative piece of international business in a very competitive contest. Articles usually conclude with a statement validating the city’s status and place in the world as an international city.
What Are International Association Events?
Market Definition and Size – For this article International association meetings and conferences are owned and operated by not-for profit professional associations. Some of the international event names may sound familiar to you:
- The World Congress of Surgery
- Congress of the World Federation of Physical Therapy
- World Diabetes Congress
- Parliament of the World’s Religions
- World Conference on Lung Cancer
- World Parkinson’s Congress
These associations are recognized as “international” and vetted by the Union of International Associations (UIA). They are carried by the Yearbook of International Organizations (a UIA publication). UIA defines the events or meetings as such:
Meetings taken into consideration include those organized and/or sponsored by the international organizations which appear in the Yearbook of International Organizations and in the International Congress Calendar, i.e. the sittings of their principal organs, congresses, conventions, symposia, regional sessions grouping several countries, as well as some national meetings with international participation organized by national branches of international associations.
In their report, UIA’s international event numbers for 2014 were 12,350. The events in 2014 would play in one of 178 countries and 1,449 cities. The top ten countries and cities for 2015 are shown below:
UIA’s annual International Meetings Statistics Report 57th edition – June 2016 categorizes the events using statistics such as:
- Whether the event is “ organized or sponsored by “international organizations”, i.e. international non-governmental organizations (INGOs) and intergovernmental organizations (IGOs) that are included in the UIA’s Yearbook of International Organizations and whose details are subject to systematic collection and updates on an annual basis by the UIA”
- Dates and Location
- Size (expressed as number of participants or attendees)
- Percentage of international attendees (40% minimum).
The last bullet above is important because it is the basis for establishing value when compared to domestic events. UIA also maintains a history of each event’s location back to 2001. This date range of event history is essential for determining predictable rotation patterns and calculating probabilities for successful bookings. The only shortcoming we find in the UIA material is that some events are in fact regional. An example is an international association which is in fact a European only association. Their annual conferences will never occur in Asia, Africa, Australia or the Americas. Therefore the UIA summary statistics related to international events not limited to regions are probably overstated.
There are other association and event directories such as the International Convention Centre Association (ICCA). In comparing to UIA there are big differences which we believe are related to the definition of international association events. For our purposes the UIA statistics are the most comprehensive and reliable directory of international events. Clearly any CVB or convention center pursuing events in this market would have to research and drill down in order to eliminate the improbable and focus on the possible. We believe UIA can provide this information. Their research findings and data base is available for a fee (about $1,500). You can also have research available on a continuous basis for a subscriber fee.
Bookings for International Events Comparing North American Cities to the Rest of the World
Without purchasing or referencing UIA’s publications, we were able to find some useful directories which show how competitive North American cities are in booking international events. In this instance we found some timely statistics in two sources:
- The OMICS International Conferences website https://www.omicsonline.org/international-scientific-conferences/ . OMICS International organizes as many as 1,000 International Science conferences. These conferences attract world renowned personalities, scientists, entrepreneurs, budding scientists, students and policy makers. OMICS International organizes Science Congress, World Summits, and International science conferences in India, USA, Dubai, Australia and Europe. OMICS also publishes scientific journals for some of the international associations.
- Reed Elsevier’s website – http://www.globaleventslist.elsevier.com/ .We all know that Reed is the largest producer of trade and professional association events in the world.
The tables below show the number and percentage for individual countries and cities for international scientific, medical and health science and engineering conferences produced in 2016 (later half) and 2017. There are no social or behavioral science events listed. These type events are the most prestigious of international conferences. Overall there are 933 events combined from both sources.
The data in the tables above, because they represent such a small amount of years, lack strong statistical validity and don’t compare with the long term, more comprehensive data that could be obtained by consulting UIA’s data base and research files. The tables above are useful and interesting because they infer how strong the US is in the scientific fields as well as showing destination appeal for the US and certain US cities.
What Criteria Do these Associations Consider in Making Event Location and Venue Decisions?
In many respects the criteria are similar to the criteria used for a tradeshow or domestic association meeting. There are however differences especially the priority of certain criteria. From the literature and case studies we researched, these are the principal and secondary criteria that are evaluated in making event location decisions:
- Air Transport Accessibility
- Direct flights from major centrally located cities
- Cost, Frequency and Duration of Flights – Includes information of necessary connecting flights
- Administrative Barriers – Visa and customs issues
- Local Support
- Welcoming assistance from the local association chapter and other prominent like-professionals and academics. Some cities have gone much further than an opportunistic one-off effort. The term “Ambassador Program” has taken hold. It is defined as a loose association of community leaders in advanced industries and scientific fields used to attract conventions in their specific field. This type of collaboration has been around for many years but in the past few years destinations around the world are now developing the concept more strategically and aggressively. Many European cities have well developed Ambassador Organizations. Washington DC and Vancouver have initiated similar programs and report that they are already yielding success. This program also assumes networking possibilities with local industry leaders.
- Planning, logistic and marketing support from the city CVB
- Subventions (subsidies)
- Perhaps this should be listed first. Those operators in CVBs and convention centers to whom I have spoken with agree that this decision making criteria is the most important. Typical subventions are; meeting venue rent free, free hotel accommodations and meals for association leadership, direct subsidy for marketing and other general expenses, a hosted reception and dinner provided by the hosting city or institution ( a research university is a good example), loans for marketing before registration fees are received, arranged excursions for city tourist sites and venues and shopping.
- Meeting facilities
- Number, size and configuration of meeting rooms
- Appearance of the meeting rooms
- Special services – Advanced A/V, simultaneous translation systems, F&B catering quality
- Advanced communications – Broadband services (WiFi), reliable cell service
- Customer service by venue staff
- The novelty and cultural uniqueness of the city
- Safety and security of the city
- A pleasant climate
- Hotel proximity to meeting venue
- Profitability – At some point the international association is going to take a serious look at how profitable the event would be at a given location. This process and evaluation would take place after a review of proposals.
- Association promotion – The association’s main interest is whether the chosen location would add credibility and prestige to the association and build membership.
Clearly any CVB or convention center pursuing events in this market would have to research and drill down in order to eliminate the improbable and focus on the possible. We believe UIA can provide this information. Their research findings and data base is available for a fee (about $1,500). You can also have research available on a continuous basis for a subscriber fee.
Determining the Economic Value of an International Event
- Direct Spending
Determining economic value is becoming more reliable over the past few years. For cities such as Las Vegas this data is fundamental – so much of the economy depends on it. Also the due diligence required to finance the substantial physical infrastructure projects (airports improvements, public assembly venues, streets and transportation, general civic improvements) demands it. Most cities have an established direct spending figure for trade shows and convention visitors. The figure is derived from surveys and interviews of out-of-town visitors. No city conducts this research in as timely and comprehensive fashion as Las Vegas.For this brief analysis the percentage difference between a foreign and domestic visitor as reported in Las Vegas will be applied. In Las Vegas the percent difference in direct spending is as follows:
The cause for higher International visitor spending is that they stay longer (about 1 day longer, 4.3 vs. 3.3 days) and they spend more. For example, an international visitor spends more than 100% on food and beverages, 250% more shopping and about 50% on entertainment (live shows). One outlier on visitor spending in Las Vegas which doesn’t exist in most US cities is gambling.
The suggestion here is that this or a similar percentage increase be applied when evaluating the value of international events. That is of course unless your city has conducted its own research. Las Vegas is in all cases a good reference check for spending differences and for research methods. Most cities will go on to parse and apply other economic benefits such as indirect spending, tax revenues, or service job creation to arrive at an overall impact number.
- The Prestige Factor
This factor is crucial for cities just developing or improving their tourism economy. International conference, congress and convention goers are business tourists. This adds a gravitas feature to the whole tourism sector. It gives an opportunity for the city and country to show off their airports, urban infrastructure as well as their hospitality sector – hotels, resorts, restaurants, conference and convention facilities, etc. In our research we found this to be often a national cause. Ireland, Cyprus, Malaysia and Korea’s national tourism branches of government all provide generous contributions to their cities and venues to use as subventions in order to attract international events. In sum, hosting international events fulfills national policy aims for recognition as a place to for global business. Global engagement is serious business.For US cities the prestige factor is present but not so pronounced. Some cities have been organized well and have succeeded in capturing a good fraction of the international events market – Chicago, Atlanta, San Antonio, Las Vegas and Philadelphia. For others the industrial sector of an international event may represent a vertical market that represents the city’s economic base. In this respect international events can contribute to economic development of an emerging knowledge based industry.
If you’re Going to Pursue International Conferences, then……..
- Do Proper Research First
- Understand that you’re entering a global competition with many more competitors, some with a great deal of experience. Know that your probability of booking success will be very low at first.
- Look for events with recognizable rotation patterns. See when they rotate to the US and learn where in the US they’ve played before. Be careful of associations that have no pattern but choose locations at random.
- Find what fits – airport/travel scheduling and issues, dates, space, space configurations, sector affinity with your city. The preferred venues are hotels. The cozy, more intimate surroundings are preferable to convention centers. Also, international events tend to be smaller than domestic.
- Do the math. Prepare some simulations. Use actual attendance data from 5 or more international conferences and calculate the economic impact of the event. Make certain that your estimate of international attendees seems reasonable. Highlight the value added for international attendees.
- Don’t expect large crowds. Yes, there are some with recorded attendance of 10,000 up to 18,000. These events are not the norm however. They are mostly well under 5,000 attendees.
- If Your Intention Is to Pursue International Events at Full Bore, You Will Have to Add to Staff and Increase Certain Expenses
- Staff will most likely include a sales manager and assistant, a research manager and an office administrator. You could possibly contract out the research function.
- Expenses besides salary will have to include separate T&E, higher than for domestic bookings, print and graphic services, and a promotional fund to fulfill subventions. About two years ago Washington DC organized to pursue international events. They staffed up in the fashion described above and went to work. In four years the economic impact from international events went from $2.5M in 2011 to $25.5M in 2015.
- If this seems too much or even unnecessary, perhaps a better strategy is to be selective and pursue only the most profitable and economically favorable international events
- Be Prepared for a Heavy Work Load
- Canvassing and pursuing eligibility for RFPs is time consuming and can be expensive. Click on the link to view an RFP for an international event – The World Federation of the Deaf. https://www.wfdeaf.org/wp-content/uploads/2014/07/WFDConf_2017.pdf
- Preparing your proposal and negotiating until closing is also time consuming and expensive. As an example, click on the link for Barcelona’s proposal for The Conference of The International Biometric Society – http://www.biometricsociety.org/wp-content/uploads/2014/03/ibs-2018-bid.pdf . This conference only has about 1,200 attendees.
- Organizing, maintaining and nurturing the Ambassador group, which appears to be a prerequisite for competing, takes a great deal of relationship building and persuasion. Your sales and marketing team will ultimately end up managing the group and acting as their administrative arm. Your team will at times perform most of the functions that a domestic trade show or convention management company would.
- Be Thoughtful about How You Will Deal with Subventions
- You won’t be subsidized by the federal government but in order to get a start in the market you may have to agree to subventions you would normally avoid. For small events the subventions are hard to justify. If your occupancy is high and the domestic event market filled with opportunities, then there is no compelling need to agree to expensive subventions. It would be best todisclosethis before entering a competitive bid. Rather, emphasize subventions which can be classifiedasvalue added and steer away from a straight cash subsidy.
- An interesting study of subventions was done by a consulting group in the UK in 2011. The report shows how subventions are material to location decisions and how they affect the competition for international events. You should click on the link below, download and read the report:
- The chart below is from the report and is a summary (although dated) of city practices regarding subventions. It’s a good quick reference.
Providing Air Conditioning and Heat on Exhibit Floors during Event Move In
This is a troublesome issue and always has been. Most recently the subject found itself on the agenda for an annual SISO meeting. My first impression was that SISO would take a policy stand, making it a critical customer service issue and pressing that air conditioning during move in should be provided at no charge. After a brief discussion with SISO leadership I learned that there is no formal SISO policy announcement and that there was true recognition and appreciation for a convention center’s high utility and operating costs.
Convention center designers have never really addressed this problem seriously or more likely, measures to make the event move in environment more tolerable were value engineered out of the project. The problem is generally widespread throughout the country from humidity prone, to bitter cold, to desert heat regions alike.
Why Is this Issue? It Seems Small Compared to All that Matters
- Excessive Heat and Humidity or Cold During Move In Is a Serious Customer Service Problem
Exhibitors face many challenges during event move in; anticipating freight arrival, exhibit construction, testing equipment, final rehearsals, etc. Adding the annoyance of excessively hot or cold and uncomfortable conditions is poor customer service.
- Providing Air Conditioning During Move In Is Very Expensive During the Summer
Commercial electrical rate schedules are higher for summer months. In New York City for example peak months are June through September. Along with peak months there are peak hours. Utilities call this time of day rates covering daytime periods generally 8AM to 4 or 6PM, Monday through Friday (weekday holidays normally excluded). These rates .for electrical consumption (KWH) can be 30% -50% higher than non-peak hours.Electrical demand rates are also applied in the same manner as consumption. Depending on where you’re located, commercial demand rates can be 60% to more than 100% higher than demand rates during non-peak months.
- (Atlanta) Georgia Power – Large Commercial Rates – Summer TOD
Assume air conditioning requires 4,000 Tons of refrigeration for 500,000 gross square feet of exhibition space on a weekday in July
Consumption (KWH): 4,000 Tons x 1.5 KW/Ton = 6,000 KW
6,000 KW x 10 hours = 60,000 KWH
60,000 KWH x $.07264/KWH = $4,358/Day
Demand (KW): 6,000 KW x $10.43/KW = $62,580*
Total Cost per Day: $4,358 + $62,580 = $66,938
*Demand charges only apply if the day’s demand (in a 15 or 30 minute interval) is
the highest for the monthly billing period. Fuel adjustment charges not in
- (New York City) NYPA and ConEd – NYPA for consumption or KWH purchased through the open market (NY is a de-regulated state). Con ED for distribution charges (demand)
Assume air conditioning requires 4,000 Tons of refrigeration for 500,000 gross square feet of exhibition space on a weekday in July
Consumption (KWH): 5,000 Tons x 1.5 KW/Ton = 6,000 KW
6,000 KW x 10 hours = 60,000 KWH
60,000 KWH x $.08/KWH = $4,800/Day
Demand (KW): 6,000 KW x $23.04/KW = $138,240*
Total Cost per Day: $4,800 + $138,240 = $143,040
*Demand charges only apply if the day’s demand (in a 15 or 30 minute interval)
is the highest for the monthly billing period. Taxes and fuel adjustment
charges not in calculations
The rates from Atlanta are relatively low. New York City rates are among the highest in the country. If anything, the above proves that air conditioning during move in days is no small matter. For show managers, paying for electrical consumption during move in is reasonable, paying for demand is not. In my time at the Javits Center I have seen monthly demand charges exceed $250,000. That was for a full building show (over 800,000 gross square feet, in August). Convention center should never permit a move in day to become the highest day of the billing period for electric demand when it could be avoided.
- Most Show Managers Can Understand the Economics of Peak Hour Costs for Electrical Consumption But Not So for Electrical Demand
Most annual convention center budgets have forecasted and factored in summer electrical demand charges. Facility managers know that there are not many opportunities for demand reduction measures like shedding loads as demand rises after the event begins. Seizing an opportunity to reduce summer demand charges therefore should not be missed. Imagine being in a situation where the move in day is hot and humid but the overnight forecast calls for a cool dry air mass for the event days. Imagine being in a situation where the move in day is on a Friday in July and the event is scheduled for a three day weekend with Monday as a holiday – no demand charges. The monthly savings can be substantial. From time to time an issue may arise where at the last minute a show manager asks for air conditioning on a move in day well after peak hour pricing has begun. Facility managers do not want to start a central plant (chillers, pumps, air handlers, etc.) during peak hours. Doing so puts you at risk that a move in day will become the maximum billing day for demand that month, the savings opportunity lost. Chiller plants normally draw a lot of demand as they approach the chilled water set point. After they reach that point, demand generally diminishes. In this circumstance you would have to provide less than 100%.
Recommended Best Practices
- Unless there are special circumstances you are advised not to provide air conditioning or heat during move in to event management at no charge. Most centers do charge. Some such as Mandalay Bay and the Mirage Convention Centers in Las Vegas provide air conditioning at no charge for the last event move in day. Some of you to whom I have spoken with say that at their center this matter is purposely left flexible. That may be a useful internal policy but it should be kept confidential, because the opposite is likely to happen, it won’t be flexible. Show managers are tough negotiators; they will sense an opportunity and persuade you to absorb the cost. There should be a clear written policy for charging for air conditioning and heat on move in days
- Do not make air conditioning and heat during move in part of the rent. Too often rent is negotiated down in order to maintain and improve market share or to accommodate a large event where the overall economic impact is very high. Also, there are circumstances where temperature and humidity ranges need to be controlled during move in. A commercial produce show is an example. Air conditioning charges during move in should be specified as a separate item in the license agreement,
- Make the charges for air conditioning and heat during move ins fair, enough to cover consumption charges from utilities,
- Always supply some air conditioning, say 15% with exhaust fans and a few supply fans at no charge. Set a floor temperature goal of the low to mid 80’s for floor temperatures. For heating, do likewise and supply heat from air handlers adjacent to outside freight doors at no charge.
- Take steps to manage demand on your own:
- If the show manager won’t purchase air conditioning for move in days when high heat and humidity are forecast, pre-cool the space several hours before the move in starts and when non-peak rates are in effect. Keep the freight doors closed, close outside air dampers as no fresh air is necessary until the space is occupied. Then just before peak rates apply, reduce most of the air conditioning operations and follow the practices from the bullet above.ASHRAE has written a few white papers on pre-cooling. Below is an excerpt:
Night precooking involves the circulation of cool air within a building during the nighttime hours with the intent of cooling the structure. The cooled structure is then able to serve as a heat sink during the daytime hours, reducing the mechanical cooling required. The naturally occurring thermal storage capacity of the building is thereby utilized to smooth the load curve and for potential energy savings.
My experience is that this works for about 5 or 6 hours. Some level of air conditioning will may have to be left on.
- If show management elects to purchase air conditioning for move in days, then pre-cool as outlined above only earlier. Do not commit to a floor temperature in the low to mid 70’s, the high 70’s and low 80’s are more achievable. On hot humid days this will also prevent ceiling drips from pipe and ductwork condensation. Pre-cooling should wash the humidity out of the building and provide positive pressure throughout. This should work to control electric demand. This should be done along with the items below regarding doors.
- Exercise strict control over the freight doors. Close those that are not being well used. You should find most general decorating companies cooperative.
- Consider transparent weather strips at the most used doors. They are an inexpensive fix but usually need to be changed frequently to maintain good visibility.
- If the show manager won’t purchase air conditioning for move in days when high heat and humidity are forecast, pre-cool the space several hours before the move in starts and when non-peak rates are in effect. Keep the freight doors closed, close outside air dampers as no fresh air is necessary until the space is occupied. Then just before peak rates apply, reduce most of the air conditioning operations and follow the practices from the bullet above.ASHRAE has written a few white papers on pre-cooling. Below is an excerpt:
- Investments that Work
- The Washington DC Convention Center normally does not charge for air conditioning during move in days. To control costs they have converted their freight doors into “speed doors”
- Washington has also connected one or two of their large chillers to an on-site generator. They can elect to air condition exhibit floors using their own power, avoiding peak hour consumption and demand costs.
- Some may say that air curtains work but my experience has been that the large ones for freight doors are too drafty and noisy
- Years ago designers at Cobo Hall designed a transition space between the loading dock doors and the exhibit floor. The barrier of a demising wall and inline freight doors helps temperature control on the exhibit floor.
- In the 1990’s McCormick Place made a major investment in chilled water storage, producing chilled water at night and circulating it for a full days use. They also supply chilled water to other customers beyond the convention center. McCormick also uses Lake Michigan water for condenser water, no cooling towers.
9/11 at the Javits Center
Last week marked 15 years. We know now that the attack wasn’t just a one-time thing and now all convention centers have legitimate concerns about terrorism during an event. The Javits Center was a few miles from the attack but we had a view of the planes hitting and the WTC towers falling. The Javits Center did play a role in the aftermath, providing logistical support to the rescue, recovery and security teams. I believe we were able to use our assets effectively and in a small way contribute to the recovery effort.
The account below was written by me 6 years ago.
Over the years many have asked if we could write an account of what happened to us that day. Our experience was insignificant compared to the events of that day, but perhaps there’s some lessons learned here if not an interesting story.
We had four events in the house that day; a large merchandise show on the lower level to open at 9AM, a store fixture and display show on the main level to open at 9:30AM, a commercial flower show also on the main level for the second move in day, and set up for a product roll out for an office technology company on the upper level. After the first plane hit at 8:45 AM the AGM called and told me he had a bad feeling about it, no one flies into the side of the World Trade Center on a bright clear day. Neither the local news nor CNN which was being broadcast on all public monitors had any news on the real cause. The AGM called again and insisted that I go up to the Crystal Palace and view what was occurring downtown and in the center itself. I was at the base of the escalator to the Crystal Palace at 9:03 AM. The view from the Javits Center had the two Trade Center towers overlapping so, if you weren’t familiar, it may appear as one large building. The second plane hit. The horizontal plume of flame and smoke made it look as if this was a secondary explosion from the first plane. CNN quickly corrected that. Both towers were aflame.
A quick meeting with all the show managers was assembled and we informed them that we were shutting down the loading docks and that there would be controlled access through the front entrances – attendees would have to go through designated doors under the view of Javits Security and State Police. There would be random checks of handbags and brief cases. We set a meeting time for 30 minutes later or sooner if we obtained any information. There were few questions and no one complained. Although unsaid, I believe everyone in the meeting had the sense that something menacing and ominous was going on downtown. It was about 9:20 AM.
Internal staff met for a time to organize radio procedures and to review evacuation plans. There was still no official word from the State Police about what was happening. All news came from CNN. We had arranged the show floor plans and compared them to the evacuation routes just before we made our way to the next information meeting with the show managers when CNN reported that the Pentagon had been hit. It was about 9:45 AM.
The big decisions were easy now and the meeting was brief. We would evacuate the center immediately; exhibitors, attendees and contractors were to follow the directions of Javits Security and the State Police since due to the loading dock closure some of the routes had changed. We would meet with show managers again as soon as practical. Everyone nodded in consent and the meeting ended. At 10:05 AM the South Tower collapsed and we saw everything disappear in an enormous cloud of dust. By 10:15 AM the Javits Center was evacuated. We estimate there were between 5,000 to 6,000 people. Then, at 10:28 AM the North Tower collapsed.
In the following hour tidbits of news and rumors came and went. We had a short lived moment of panic when news came down that the bridges and tunnels were likely targets too. The south tube of the Lincoln Tunnel was 25 feet below Hall 1A. The State Police quickly communicated with Port Authority Police and we learned that the Tunnel was evacuated and inspected. We were safe. Staff was dismissed and key people were selected to remain. Many volunteered to stay. At 11:02, the mayor ordered the evacuation of Lower Manhattan. What was happening was unbelievable.
At about noon, city emergency service personnel arrived and asked for help. They were covered in dust and soot. The only clean part of their faces was inside the outline of the face masks that they had been wearing. They needed to set up a triage center and a field hospital as soon as possible. While we explored the internet for plans, building maintenance staff quickly began to set up portable utilities, lighting and furnishings in the North Pavilion. Within the hour a medical team arrived. They left shortly afterward and headed off downtown. The casualties and injured would be handled closer to the WTC site. At about 1 PM one of our managers called me up to the South roof. The scene was like a war movie. A stream of people as far South as I could see were walking North on 12th Ave. From the heights they appeared as a ribbon of refugees fleeing a city under siege. The cloud of smoke from the World Trade Center was behind them.
The remainder of the day saw emergency crews arrive at Javits. At one point in order to create more space, the remaining managers and maintenance personnel took forklifts and hand trucks to move out the partially installed exhibit booths from the commercial flower show on the main level. Emergency crews came from New Jersey, that evening teams of “smoke jumpers” arrived from out West, teams of rescue dogs and their handlers arrived from all across the country and Canada, a large contingent of New York State Troopers arrived and finally the New York State National Guard. Our team set out utilities; electric, phone lines, internet lines, portable showers, etc., etc. Centerplate’s GM was busy too. That evening he prepared over 300 chicken and rice dinners. He had sent all his employees home and did this all by himself.
The next few days were like a blur. Rescue teams came and went. Javits became the storehouse for supplies, lots of bottled water and pet supplies for the dogs. We were announced as the rallying point for volunteers and they came by the thousands; tradesmen carrying tools, doctors carrying their medical kits, even a few crazies. The only volunteers needed that I recall were operating room nurses and welders trained for work in confined spaces. The President arrived one day to meet with the families of the dead and missing. A planned 1 hour visit became a 5 hour visit.
We learned that nothing can replace a well trained team of managers and skilled workers. We learned how invaluable it is to have permanently stationed police on site. It gives your actions in an emergency a strong sense of legitimacy. Convention center designers should remember that. We learned that convention centers because of their scale, large spaces, utility capacity and access are logical places to use when there’s a general emergency. I know it sounds trite because it’s so often said, but we learned that people really do rise to the occasion when necessary and with a spirit I hadn’t seen before. We learned that trouble creates its own capacity to handle it.
God Bless America.
The phrase “vertical markets” has a different meaning depending on what segment of the trade show and convention industry you’re talking about. Trade show organizers regard a vertical market from a purely commercial point of view. For them, vertical shows promote a single industry category to a specific clientele. By contrast, a horizontal show has many product categories with broad market appeal. For example, Cebit, the huge technology event staged annually in Hannover, Germany, is a horizontal event. CeBit showcases a wide range of innovations and products from many vendors. The attendee base is from many industries. Compare Cebit with another IT event, the Healthcare Info & Mgmt Systems Society Conference and Exhibition held in Chicago this year. This vertical event is held specifically for the medical healthcare sector and the difference is evident.
For convention center and CVB sales and marketing teams, the meaning of vertical markets is very different. Here the meaning is broad and can refer to any event in a particular industrial sector. The phrase “verticals” is often used in marketing plans and intra-industry conferences among convention center and CVB managers. Quite often you will see staffing responsibilities defined with “vertical” sales and marketing assignments; medical, financial, manufacturing, agricultural, religious, etc.
How are vertical markets selected?
- The Case of Professional Associations – For cities pursuing professional association events, the destination appeal, the hotel and meeting room package and the overall cost to association members governs location decisions. Cities and convention centers should know their destination attributes, have a good sense of price point tolerances and overall be able to choose verticals which fit. Large leading convention cities which attract a wide range of association convention and conference business will naturally choose the most reliable and profitable verticals to target. For second and third tier cities the targeting of certain verticals has to be more measured and reflective.
- The Case of Trade Associations and Privately Owned Trade Shows – For these events, location choice is governed by the marketplace where buyers and sellers will reliably gather. Choosing which verticals to pursue is based on straight logical business reasons; the industry represents a leading employment base in the region, there is emerging industry growth giving the region leadership status and enumerated by the number of start-up companies, new patents, amounts of venture capital investment, etc. It could also be that the event’s industrial sector fits your city’s traditional brand – San Jose is “Silicon Valley”, Nashville is “Music City “ , Chicago is “Tool Maker, City of Big Shoulders”. These are all good reasons to dedicate sales and marketing resources to certain vertical markets.
We considered all this and believe the selection process for verticals falls short. What is missing is quantitative analysis of actual market behavior over time. Our belief is that the effective use of statistics and thus chances of success (probabilities) complements and improves marketing judgment. Well informed professional judgment can contribute insightful, nuanced interpretations of data and add market intelligence that cannot be enumerated. Over time quantifying things will become a basis for reliable business forecasting and provide a true rationale for pursuing verticals. It also creates a clear vision of market impediments and opportunities.
We took an in-depth look at two verticals; medical/health science and religion. Both are popular verticals; medical/health science due to its growth, reliability and spending behavior and religion because their events normally occur in summer. Our approach was to obtain as much information as possible by reviewing event directories, news articles about the same subject markets and visiting individual event websites. Our method was to select a sample of events (we chose large national events) and obtain a history of event locations. Our hope was to obtain 10 years for each event, our average was 6 years. We fit the events into eight (8) regions which were selected based on geography as well as economic and cultural similarities:
- Hawaii – On Oahu – Honolulu, and other islands – Maui, Kauai and Hawaii
- Pacific Northwest – Alaska, In Canada – Vancouver, Washington, Oregon and Idaho
- Southwest – Arizona, New Mexico, Nevada and Texas
- Rocky Mountains – Utah, Colorado, Wyoming and Montana
- Midwest/Plains – North and South Dakota, Iowa, Missouri, Oklahoma, Nebraska, Kansas, Minnesota, Wisconsin, Michigan, Illinois, Indiana, Ohio
- Northeast – In Canada – Toronto and Montreal, Maine, New Hampshire, Vermont, New York, Massachusetts, Rhode Island, Connecticut, New Jersey, Pennsylvania, Delaware, Maryland, District of Columbia
- Southeast – West Virginia, Virginia, Kentucky, Arkansas, Louisiana, Mississippi, Alabama, Tennessee, North and South Carolina, Georgia, Florida, Puerto Rico
Our main objective was to record shows with fixed locations and examine and record shows that changed locations each year. For rotating events we picked out predictable patterns as they rotated regions and cities within regions. We also determined probabilities of success for individual cities. The analysis also permitted us to draw conclusions, to explore the fundamental reasons for location decisions and to offer suggestions for convention center and CVB sales teams. We feel we achieved a true and unique understanding of these event markets. The tables below show the results for leading cities:
The statistics above show a more open ability to for cities to compete for these events if a larger sample of rotating national events is used. When only surveying large and presumably more important medical/health science events the findings show the events more likely to choose higher rated cities. Interestingly, Chicago’s percentage climbs to 19.2% if all TSNN Top 250 shows are included (RSNA, ASCO and Chicago Dental among them).
For religious events there is clearly a preference for cities in the Midwest and Southeast. Also notable is that second and third tier cities have relatively high probabilities of booking success.
Convention center and CVB sales teams need to take time to create a statistical description of each vertical shaped and informed by professional judgment as a likely market. Obtain as much history as possible, look for predicable patterns and calculate chances of success. Find out why events choose certain regions, cities and venues over others. Compare one vertical to others and determine which is worth pursuing based on probabilities. The purpose for defining these verticals and obtaining predictable patterns and probabilities is to organize your marketing/sales program to concentrate on the most likely prospects.
Click the link below and learn more about the medical/health and religious event markets by purchasing and downloading our white papers – “In the Pursuit of National Medical/Health Science Events – A Primer Focused on Convention Centers” and “Booking National Religious Events – A Primer for Convention Centers on How Event Location Decisions Are Made” http://www.conventioncenternow.com/white-papers
Keeping Track of Business – All About Occupancy
For convention centers there is certain elegance in using occupancy as a key performance indicator (KPI). One indicator can reveal all – you’re busy, you’re prosperous and perhaps profitable, your operation provides a steady employment base, and your business draws a lot of out-of town visitors to city hotels, restaurants and entertainment venues – or not. High occupancy draws praise, increases revenue, supports further investment, and permits a level of selectivity when booking events. Low occupancy draws scrutiny, often unfavorable, which questions the wisdom of the investment in the first place, and the reaction from convention center management and advocates is generally uneasy and strained. However, occupancy as a performance indicator is unavoidable. As operators you should focus on it and understand how to react and use it. Occupancy is not complicated. Using the method that hotels use as a model is a simple and legitimate way to follow. The performance indicators used by hotels is based on the “Uniform System of Accounts for the Lodging Industry”. These standards are tried and true and accepted by the hotel industry:
For hotels, occupancy is the percentage of available rooms that were sold during a specific time period.
- Supply (Rooms Available) – the number of rooms in a hotel multiplied by the days in the month
- Demand (Rooms Sold) – number of rooms sold by a hotel, does not include comp rooms or “no-shows”
Occupancy is calculated by dividing the demand (number of rooms sold) by the supply (number of rooms available). Therefore – Occupancy = Demand / Supply. Reporting periods for hotels are generally by month and quarter both, with a cumulative average calculated annually. Note that occupancy is not applied to other parts of the hotel such as meeting rooms. The core business of the hotel is to sell sleeping rooms, so the occupancy measure relates to only core performance.
Measuring occupancy should be very similar for convention centers. In this instance because meeting rooms are sometimes viewed differently than exhibit halls, all rentable space (meeting rooms, ballrooms and exhibit halls) should be expressed in square feet.
- Supply (Space Available) – The amount of square feet available (sum of meeting room, ballroom and exhibit hall square footage) over a given time period
- Demand (Space Rented/Licensed) – The amount of square feet rented/licensed (sum of meeting room, ballroom and exhibit hall square footage) over the same time period
Occupancy is calculated by dividing the demand (amount of square footage rented/licensed) by the supply (amount of square footage available). Therefore – Occupancy = Demand / Supply. As an example, say your convention center rented 150,000 sq. ft. for 17 days in September. Your center has 300,000 sq. ft. available to rent each day, then:
Occupancy (September) = (150,000 sq. ft. x 17 days)/ (300,000 sq. ft. x 30 days)
Occupancy = 2,550,000/9,000,000 = 28.4%
Curiously, in my time as a consultant I have run across more than one convention center using a different method which is absurd and just plain wrong. In those cases any occupancy, no matter how small, is regarded as 100% for the time period. Now that’s more than a fisherman’s lie, a great deal more.
Occupancy is always questioned when serious capital investments, like center expansion, are considered. If board members don’t question it, bankers surely will. There are always distinctions, implications, and complexities when measuring something so important. Know what they are and be prepared to explain things rationally. It’s best to have other performance indicators as support.
- Event Move – In and Move – Out Days – Regard these days as occupied days. Here is where you could say that one center’s occupancy figure for an event does not equal another’s. If your occupancy level is traditionally low, you will often permit many more move-in and out days than a center with high occupancy. You may even comp or discount the rent for those extra days. Contrast this to a very busy center where aggressive date/time management means attaining a few more events. Hence, the number of move – in and move – out days is actively negotiated. The difference between the two convention centers may be inconsequential but it is a worthwhile distinction to understand.
- What About a History of Low Nets? Doesn’t that De-value the Value of Using Occupancy as a Key Performance Indicator? – Yes it could. In my time at the Javits Center we always measured show net to gross square footage (expressed as per cent) for exhibit halls. Our purpose was to monitor net square footage performance. A low net to gross ratio was often cause for a discussion with show managers whose event may be declining. The Javits Center had many recurring events and still does. If we saw an event consistently fall below a certain net/gross percentage, after a time we’d move the event to less desirable space in favor of a show that was growing or a new show. Our advice is to measure net/gross % in parallel with occupancy.
- What About the Quality of the Events? Where Does Occupancy Fit In? – Occupancy is agnostic to the quality of events. Agreed, there are some low quality events, like electronic wholesalers or flea market type consumer events. Let the quality issues come out in the other performance indicators such as service revenue per net square foot or the number of hotel room nights generated.
- What About Events that Are Licensed Outside of Rentable Space? – The example set by the hotel industry applies. They only measure sleeping rooms in their equation. Sleeping room sales is their core business and a simple and pure occupancy figure avoids distortion and equivocating. Rental of meeting rooms or ballrooms is not in a hotel’s occupancy rate. But consider that most other hotel income, meeting room rental, F&B, parking etc., derive from sleeping room sales. Some convention centers conduct business outside normal rentable space (meeting room, ballrooms and exhibit halls). The LA Convention Center and the Javits Center enjoy revenues from film and photo shoots. The price basis for this business is normally a location fee, unless they are using meeting rooms or an exhibit hall. That’s not the usual way film and photo shoots operate however. They favor public spaces and tend to be free ranging, making on-site changes and often using a variety of corridors, outside space, even the roof. It’s tempting to include all the free ranging space used and include it in occupancy calculations. Our advice is stay pure, keep this square footage used out of occupancy calculations unless they operate in a fixed rentable space.
Now that you understand occupancy, use it as a statistical foundation for other key performance indicators:
- Compare occupancy by exhibit hall by month – Use it as a basis for setting rental prices. Demand pricing is used in many other business sectors, most commonly airline travel and hotels. You can simulate past years occupancy to see how revenues can change with a demand pricing model. The objective of course is to increase rental revenue and create price incentives for events to consider off months and less popular halls. To our knowledge no convention centers use demand pricing as a consistent formal pricing method.
- Calculate monthly and annual revenue and expense per Occupied Day – Use this as a basis for forecasting based on predicted occupancy.
- Calculate monthly and annual energy use and cost per Occupied Day – Use this as a basis for forecasting energy costs, one of your largest line expenses. Graph same and you may be surprised what you find. Our good guess is the result will be non – linear.
Seventy Percent (70%) – Why is it Maximum Practical Occupancy?
More than 20 years ago the firm PWC proclaimed 70% to be the maximum practical occupancy for convention centers. Their logic was that convention and trade shows have definite dates and days of the week in mind and typically don’t compromise. Naturally there are gaps of several days or more between these events. Add holiday times of year such as Christmas when any trade show or convention is rare. Now the event day possibilities lessen, making 70% ring true. Having experienced over 70% occupancy, there are other factors to support PWC’s theory:
- Building and plant maintenance becomes quite difficult. Deferred maintenance lists grow rapidly. Odds increase for a utility infrastructure failure – power outages, air conditioning failures
- Labor and staff end up working long hours. Sometimes inexperienced part time workers have to be hired, leading to service complaints. Vacations and time off become difficult to schedule
- General Decorating contractors, already working with thin profit margins, see profits shrink as they may have to fly in extra management and supervision from other cities. Labor over-time prices are unavoidable, except in cities with “1st eight straight” work rules.
Facility Management – Energy Management – Choosing a Replacement Lighting for High Bay Fixtures in Exhibit Halls – LED vs Induction Lighting
For high bay lighting applications in exhibit halls, most of you have already made the transition from mercury vapor to metal halide. Now many of you are no doubt thinking about the next transition. Lighting technology is improving at a very rapid pace and each technology transition provides material improvements in lighting efficiency (lumens/watt), lumen depreciation, lamp life, energy costs and maintenance costs. Two lighting technologies have demonstrated clear advantages over metal halide; induction lighting (IL) and light emitting diode lighting (LED).
IL lamps are a specialized type of fluorescent lamps that do not have direct electrical pin contacts but rather use an electromagnetic coil which provides a more gentle start making the lamp life much longer. Their commercial application is growing steadily and they are frequently used for street, parking lot and site lighting. IL’s long bulb life (100,000 hours) make them an excellent candidate for high bay lighting applications.
Until this past year operators of commercial buildings with ceiling height more than 20 feet had limited choices for the next generation of energy efficient lighting. LED technology could not measure up to customer expectations for providing uniform light at floor level for high bay fixtures. However, rapid improvements in luminaire design (especially in regard to brightness and glare) and lighting efficiency make LED a competitive choice. Also, the differentiator of pricing between the two technologies is slowly disappearing. Falling prices and rising lighting efficiency is beginning to generate savings that offer payback periods of 2-3 years for LED comparable to IL.
There are many quick and simple comparison charts and tables available on the internet listing the pros and cons of LED and IL. It’s important to understand that these references often promote a point of view where one technology is favored over the other. The negative references tend to focus on the case studies of low quality products which often populate markets when new technologies are rolled out- this is the case with LED.
Operating Factors – Comparison
The comparisons below between IL and LED represent a composite of actual installation experience as a facility consultant for St. Johns University in New York City, an extensive literature review and, interviews with lighting engineers and the Association for Energy Engineers:
- Lighting Efficacy (lumens per watt – l/w)
- LED – 85 -95 l/w; New generation LED bulbs are reported to have efficacy values of 110- 120l/w. Philips Lighting has reported development new LED bulbs with efficacy values exceeding 200 l/w.
- IL – 70 – 85 l/w
- Color Rendition Index (CRI) – Convention centers should consider themselves as a retail environment. CRI values less than 80 are not acceptable. Ask distributors about bulbs with CRI values greater than 80.
- LED – 80
- IL – 80
- Correlated Color Temperature (CCT –in degrees Kelvin) – The higher the CCT the more clean or bluish the light quality. A lower CCT (<3000) will produce a warmer light quality.
- LED – 2,700K – 6,500 K
- IL – 2,500K – 6,500K
- Lamp/Bulb Life (in operating hours)
- LED – 50,000 to 55,000 hours
- IL – 100,000 hours
- Lamp Lumen Depreciation (LLD – % lumen loss over time)
- LED – LEDs will see a gradual decrease very similar to IL in lumens to 50,000 hours then LLD will drop steeply. This performance is dependent on the ability of the fixture to dissipate heat. LLD will be greatly accelerated if this cannot be controlled.
- IL – IL bulbs lumens decline about 10% in the first 10,000 hours then remain fairly constant until about 70,000 hours when LLD begins to drop steeply
- Light Dispersion Characteristics
- LED – LED has more flexibility with light-distribution patterns. With LEDs and their secondary optics, you have the ability to get the light where you need it.
- IL – Induction luminaires must be used with a reflector in order to make use of the total light output.
- Glare Characteristics
- LED – Can be a serious problem. Poor fixture design and elevation placement can cause very distracting glare with LEDs. LEDs light comes from tiny sources that create very high brightness from a very small area — very high nits or candelas. The key to success is optics. This is no small matter to convention center management and you have to get it right.
- IL – Not a problem with properly designed luminaires
- Reliability (Failure Rates)
- LED – There are reports of unsatisfactory reliability from poorly manufactured fixtures and bulbs. Convention center managers are wise to rely on a high quality LED manufacturers (GE, Philips, Lumileds, Cree, Nichia, OSRAM) to ensure reliability
- IL – A more mature technology with a good reliability record
- Ambient Temperature Sensitivity
- LED – Very sensitive to sustained high temperatures (>25 degrees C or 77 degrees F). Many high-bay LED fixtures feature a horizontal top surface that’s susceptible to dirt accumulation. This reduces the fixture’s ability to keep the lamps cool. It will also reduce lamp life and increase LLD. Fixtures with vertical fins are less prone to clogging from dirt. For exhibit halls in most of the US, there is a definite stratification of temperatures in exhibit halls especially during event move in and move out. Temperatures at elevations above 25’ can easily exceed 90 degrees F. If LED is elected, be sure to compare a fixture’s rated temperature to the expected ambient conditions. Otherwise, you may have to consider de-stratification fans (paddle fans won’t do). If choosing LED obtain the lamp/ with the best temperature performance.
- IL – Much better performance at high ambient temperatures (50 – 100 degrees C or 122 to>200 degrees F) with little to no effect on lumen output or lamp life
- Fixture Appearance
- LED – Some of the heat sink designs make the fixture look very unconventional. Also a flat topped fixture is likely to accumulate dirt.
- IL – Very conventional looking fixtures.
- LED – Presently up to 5 years
- IL – 5 to 10 years
- Disposal of Hazardous Waste
- LED – There may some exotic elements in the circuitry. Ask the manufacturers and pay attention to environmental protection regulations
- IL – IL contains a small amount of mercury. The disposal of mercury is regulated and requires special procedures
We are clearly in favor of LEDs over IL. The pace of improvements in all operating factors is very rapid and we believe the IL advantages, such as lamp life, will slowly disappear. We advise that if elected, you choose on the basis of quality considering all factors, not simply energy savings. This means relying on brands that have a history and indeed legacy of manufacturing quality lighting products. Other factors to consider in this decision are listed below:
- Certainly no convention center manager wants to be faced with a highly visible failure of LED fixtures. For LEDs, there is still uncertainty regarding consistent quality as industry wide and governmental standardization and regulation continue to evolve.
The DOE Energy Star program is one where you can find standards which should give some safety and direction to a decision to installed high bay fixtures:
Look for the ENERGY STAR label. ENERGY STAR means high quality and performance, particularly in the following areas:
- Color Quality
- 6 different requirements for color to ensure quality up front and over time
- Light Output
- Light output minimums to ensure you get enough light
- Light distribution requirements to ensure the light goes where you need it
- Guidelines for equivalency claims to take the guess-work out of replacement
- Peace of mind
- Verified compliance with more than 20 separate industry standards and procedures
- Long term testing to back up lifetime claims
- Testing to stress the products in operating environments similar to how you will use the product in your home
- 3 year minimum warranty requirement
All ENERGY STAR products are subject to random testing each year to ensure they meet the ENERGY STAR requirements.
- Consider the fact that most of the retail world is converting to LED. The exhibit floor during a trade show is very much like the retail environment.
- Philips Lighting has entirely abandoned Induction lighting and is actively promoting LEDs over all other lighting technologies (at which they are the global leaders).
- Convention center finance managers have grown used to very favorable ROIs and paybacks for lighting improvement projects, usually less than 3 years. In this instance, where the higher cost may push the payback higher, we recommend a life cycle costing evaluation. If capital is a problem, there are many rebate programs available related to demand reduction as well as straight energy conservation through your electric utility and/or state government.
Before you launch a lighting replacement program with LED in mind, we recommend that you engage a lighting engineering group, one that has many retail clients. In lieu of hiring a lighting engineer, choose a lighting distributor that has no strong business ties to either IL or LED manufacturers. In fact a record of installations using both technologies should be a prerequisite. Narrow your choices but first do a test in one or more areas of your exhibit halls, take measurements and seek reaction from some of your clients.